Step 1: Check your retirement lump sum
Your pension type, scheme rules, salary and service can affect the benefits available. Ask your provider for a written retirement-options statement before making a choice.
Personal pensions and the 25% option
A PRSA or RAC can generally provide a retirement lump sum of up to 25% of the fund, subject to the applicable rules. A PRSA used for AVCs must be considered alongside its linked occupational scheme.
| Retirement lump sums across your lifetime | Income Tax treatment |
|---|---|
| First €200,000 | Tax-free |
| Next €300,000, up to €500,000 in total | 20% |
| Amount above €500,000 | 40% under PAYE; other applicable deductions need checking |
These limits apply across retirement lump sums, not separately to each pension pot. Previous and foreign pension lump sums can affect the calculation. See Revenue's retirement lump-sum guidance.
Occupational pensions and AVCs
Occupational-scheme lump sums can depend on salary and service. There is no single service formula that safely describes every scheme or early-retirement case. Ask the scheme administrator to show its calculation, the scheme rules used, the treatment of linked AVCs and any prior benefits. A disagreement about an existing award needs the administrator's explanation and, where necessary, specialist advice.
Step 2: Compare the remaining-fund options
Depending on your pension and circumstances, options may include an Approved Retirement Fund (ARF), an annuity, retaining money in a vested PRSA or a taxable payment. Availability and tax treatment need checking with the provider. A PRSA does not have to move into an ARF merely because benefits start.
| Question | ARF | Annuity |
|---|---|---|
| How is income provided? | Withdrawals from an invested fund; its value can rise or fall. | An insurer pays the income specified in the contract for life. |
| What can change? | Withdrawals can vary, subject to product terms and tax rules. Charges and withdrawals reduce the fund. | Income and survivor or escalation options depend on the contract chosen. Access to the purchase capital is generally lost. |
| What risks remain? | Investment losses and running out of money. | Inflation can erode a level income. Guarantees depend on the insurer and contract. |
| What happens on death? | Treatment depends on the beneficiary and tax rules. | Payments may stop or continue under a selected survivor benefit or guarantee period. |
Fund size alone does not decide which route is suitable. Compare a current written annuity quotation with an ARF illustration that includes charges, investment risk, withdrawals and other income. Some people use a combination.
Imputed distributions: a tax calculation
An imputed distribution is an amount treated as paid for tax purposes when relevant actual distributions fall below the statutory calculation. It is not a recommended or guaranteed sustainable withdrawal rate.
Source: Revenue Pension Manual, Chapter 28 (updated May 2026). The €2 million distribution threshold is a different rule from the Standard Fund Threshold used to test pension benefits.
Older references to AMRFs
The former Approved Minimum Retirement Fund requirement has been abolished. If an older illustration refers to an AMRF, request current options from the provider. See Revenue's ARF and AMRF guidance.
Step 3: Check tax across all your income
These are 2026 reference figures, not a calculation of your personal liability:
- Income Tax: the single-person credit is €2,000 and the Employee PAYE Tax Credit is up to €2,000 where eligible. The ordinary single-person standard-rate band is €44,000 at 20%, with the balance at 40%. The age credit is available from the year you turn 65: €245 if single or singly assessed, or €490 for a couple under joint or separate assessment where either partner qualifies.
- Couples: under joint assessment the standard-rate band is €53,000, with a possible increase of up to €35,000 limited by the lower earner's income. Credits and bands depend on circumstances; do not assume two identical allowances can simply be combined.
- USC: treatment depends on the income type and your circumstances. DSP State Pension payments are exempt from USC but remain liable to Income Tax unless an exemption applies. Other pension or ARF income may be liable; exemptions and reduced-rate conditions must be checked.
- PRSI: the treatment depends on the income and your circumstances. Do not apply a blanket age-66 exemption to every retirement-income source. DSP State Pension payments themselves are not liable to PRSI.
Check Revenue's 2026 tax tables, State Pension tax treatment and older-person PRSI and USC guidance.
Prepare for a retirement-options conversation
- Get your current benefit statement and a written list of the options available under each scheme.
- List previous retirement lump sums and your other expected income, including the amount and start date of any State Pension award.
- Ask for each option's charges, tax assumptions, survivor benefits and any rights that would be lost.
- Keep personal records securely. Share them only through a verified provider or adviser's agreed secure process.
Check the advice route before acting
Use the regulated-advice guide to check a firm's identity, permissions, service and fees. Pensionplanner.ie provides information, not a personal recommendation, and has no appointed referral partner.
Send a retirement-options enquiry